Singapore the world's best country to invest in infrastructure

According to a research by asset consultancy EC Harris, funds looking for a steady and reliable return on the capital they invest in infrastructure projects will look no further than Singapore.

The firm’s ‘Infrastructure Investment Index’ ranked 40 countries across the globe according to how attractive they are to infrastructure funds. In order to gauge their appeal the study looked at various issues including the ease of doing business in each market, tax rates, GDP per capita, government policy, the quality of the existing infrastructure and the availability of debt finance. Combining all of these factors provided a strong overview of the risk profile for each market and how attractive each one is likely to be to potential investors.

Overall, the report showed Asia and the Middle East were emerging as the most attractive regions in which to invest in infrastructure, as high levels of tax, bureaucracy and regulation threatened to undermine Western Europe’s future competitiveness.

The study identified major opportunities across the wider Asia-Pacific region however there was significant variance in the level of risk facing investors in each market. Singapore, Malaysia and Australia were deemed to be the most attractive countries in which to invest in infrastructure, finishing in first, seventh and ninth place respectively.

Singapore scored consistently high in all of the key criteria used to rank each market, with the maturity of the business environment and the transparency of the political and legal systems, particularly important factors in helping to build confidence with private investors.

Richard Marriott, Head of Lenders & Investors for EC Harris in Asia said: “Singapore will always be an attractive market to investors however much of the existing infrastructure is already world-class. For funds, this means the biggest opportunities to drive increased profit margins are likely to come in adopting a more innovative approach to how these assets are managed, in other words, unlocking untapped revenue streams in mature assets..

China emerged as the most attractive of all of the BRIC markets, finishing in 18th position overall, four places above India in 22nd place, and well ahead of Brazil and Russia who finished in 31st and 35th place. The study highlighted a host of opportunities within China for infrastructure investors, particularly in Central and Western parts of the country where economic development imbalances and growing levels of urbanisation had created vast geographic differences and a pressing need for new infrastructure.

“Private finance will be needed to fund the volume of infrastructure development planned in China over the next decade. However, not all of these schemes will be commercially lucrative and success will depend on how well risk is identified and mitigated at the outset. Selecting the right opportunities will also require thorough due diligence, a detailed understanding of the local market and links to the right partners, particularly if investors want to secure access to highly-monopolized industries like energy or transportation” added Marriott.

At the other end of the scale, Indonesia and the Philippines were pinpointed as the riskiest markets across Asia in which to invest in infrastructure schemes. Whilst the report identified excellent long-term growth prospects in Indonesia, concerns around corruption, political stability and global connectivity increased the level of risk facing investors, which could see them focus elsewhere. In the Philippines, public-private partnerships are seen as key to financing large-scale infrastructure schemes however the immaturity of the legal framework and limited track-record in this space, meant the market remained a risky bet for investors.